Cognizant CFO: Expect More Investments Like Code Zero

Cognizant plans to continue making partnership investments along the lines of its recently announced acquisitions of Atlanta-based Code Zero Consulting and the French operations of Paris-based EI-Technologies, according to Cognizant CFO Karen McLoughlin.

“Partnerships in general have become a much more important part of the go-to-market story” for Cognizant, she said Feb. 11 at the Goldman Sachs 2020 Technology and Internet Conference in San Francisco.

“Historically, if you go back six, 10 years ago we tended to not have a lot of strong partnerships and we would certainly help a client with decisions around solutions and so forth, but we tended to be much more product agnostic,” she noted.

However, she explained: “In today’s world, you must have strong partnerships with a number of different types of firms, including the hyperscale firms and then specialized firms like a Temenos or a Guidewire or so forth. And it’s okay to go-to-market like that and that is a bit of a change for us and it is certainly something that” new Cognizant CEO Brian Humphries “has accelerated our thinking about and the investments that we make in those partnerships.” Humphries replaced Cognizant co-founder Francisco D’Souza as CEO last year.

On its recent earnings call, Cognizant executives talked about investing, “particularly in our relationships with the hyperscale firms” and “some of that will come through acquisitions that we do, like the two transactions we announced last week with Code Zero, which is already closed, and then EI-Technologies,” McLoughlin said, noting those firms are both Salesforce partners.

“We will continue to ramp up those types of investments to support us, and we think those are great opportunities to really go-to-market together and drive a lot of growth going forward,” she told the conference.

Code Zero is a provider of consulting and implementation services for cloud-based configure-price-quote (CPQ) and billing solutions. EI-Technologies is a digital technology consulting firm.

In the fourth quarter (ended Dec. 31), meanwhile, Cognizant saw “some continued strengthening in our North America business versus where it had been earlier in the year,” McLoughlin also told the conference. “We were very pleased to see that trajectory and the activity and the energy that’s coming back into our North America business,” she added.

North America business still accounts for over 75% of Cognizant’s business, she said later in the presentation, responding to an attendee’s question. “While that’s terrific and we’re excited to see that business continue to get better, it really is important that we drive significant expansion outside of North America as well,” she conceded.

“There are very significant markets in Europe and Asia and elsewhere and we are under-represented there,” she went on to say, adding: “A lot of the investments that we’re making in these new sales hires are in the growth markets. So, from a percentage perspective of where the headcount is going, it is weighted towards those marketplaces and we will continue to add more talent to those teams to accelerate the growth there.”

At the same time, “if we can find good acquisitions particularly in Europe that we like – we’ve done a number of them; we’ve done acquisitions in Australia, a small one in Japan — we will continue to look for those acquisitions,” she said.

However, she explained: “First and foremost, we think of acquisitions as an enabler of our strategy. We don’t view them as growth in and of themselves. So, we really want to make sure that they do align with our strategy, that they are acquisitions that we can integrate effectively because, at the end of the day, this is a people business. And so, when we buy companies, we really look at the talent and culturally [whether] they align with us. Are there things that they are bringing to Cognizant that we don’t have already ourselves or that we can’t build faster or cheaper? But certainly we try to put a focus on where those acquisitions are. And if we can find them outside of North America that’s clearly a homerun for us. So, we will continue to use that as a vehicle as well.”